A New Perspective on Energy Contagion in Colombia: Evidence from Wavelet Analysis and Co-Movement Dynamics
Journal Title: Revista CEA - Year 2024, Vol 10, Issue 22
Abstract
Purpose: The aim of this study was to examine the existence of energy contagion from the most important energy indicators—oil, natural gas, and coal—to spot electricity prices in Colombia. Design/Methodology: The methodology employed here was correlational, with a quantitative approach. Daily data from February 2011 to December 2018 were used, excluding the 2008 financial crisis and the Covid-19 pandemic. The data were sourced from Refinitiv and XM. Wavelet analysis and co-movement dynamics were applied. Additionally, cross-correlation was used to analyze financial contagion from energy indicators to spot electricity prices. Findings: This study demonstrated that there are significant long-term correlations between energy indicators and spot electricity prices. It also determined the presence of energy contagion from natural gas and Brent crude oil to spot electricity prices during crisis periods. Regarding coal, there is no clear evidence of contagion. These findings are relevant for understanding how changes in the global energy market can affect electricity prices in the long term in an emerging economy like Colombia. Conclusions: Energy contagion impacts the global economy, especially in energy-dependent emerging markets. This study emphasizes the need to understand and mitigate risks in the energy market, offering key information to companies, investors, and policymakers. Originality: Advanced methods were employed here to analyze the impact of international fuel prices on the Colombian electricity market, identifying contagion periods and highlighting the vulnerability of emerging economies to changes in the global energy market.
Authors and Affiliations
Luis Angel Meneses Cerón, Jorge Eduardo Orozco Álvarez, Juan Camilo Mosquera Muñoz, Víctor Manuel Vélez Rivera
Keywords
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